Sage Manufacturing Survey Signals Stronger Economy

More than a third of manufacturing firms in the small and midsized business (SMB) sector expect the economy to strengthen in the coming six months, while nearly half expect it to remain the same, according to the results of the second annual Sage Manufacturing Survey announced by Sage North America. Respondents also anticipate an increase in orders, production and exports. Sage conducted the survey among small and midsized manufacturers and distributors.

Economic confidence is on the rise

Small manufacturing firms are becoming more confident in the economy, with 36 percent of respondents expecting the economy to grow stronger and 48 percent expecting it to remain the same. These numbers are up from 2012, when only 27 percent anticipated an improvement and 57 percent expected no change. Sixteen percent of manufacturers surveyed expected the economy to weaken, showing no change from 2012.

Over the next six months, 49 percent expect orders to increase, 42 percent believe production will rise, and 25 percent anticipate more exports.

The December 2013 jobs report from the Bureau of Labor Statistics, which was seen as positive, showed the number of manufacturing jobs continuing to trend upward with the addition of another 9,000 jobs. The economy added 77,000 manufacturing jobs in 2013.

“Manufacturers are heading into 2014 with increased confidence in the economy and an optimistic outlook for growth in both production and hiring,” said Joe Langner, executive vice president – mid-market solutions for Sage North America. “To that end, companies should continue to look at technology to augment and support their expansion.”

In an interview with SCRM, Langner added there has been a “huge” talent gap in manufacturing.

“Unfortunately, the jobs with the most impact on performance for many manufacturing companies are the jobs that are largely going unfilled,” he said. “If this problem is not solved this talent gap will have a negative impact the future growth of the American manufacturing industry, which is an industry that is pivotal to the economy stability of this country.”

Domestic demand and global recovery driving growth

Among the three areas that manufacturers believe most positively impact their business are:
• Stronger domestic demand (68 percent).
• The global economic recovery (36 percent).
• “Reshoring” of manufacturing (26 percent).

Two out of five manufacturers mentioned “reshoring” of manufacturing as a significant driver of business growth—a noteworthy statistic as the American manufacturing segment continues to come back to life. Among those who believe “reshoring” is having a positive effect, many are gaining new business by offering customers greater flexibility to make product adjustments based on market response and the ability to produce smaller lots. None planned to offshore any manufacturing to other countries, and another 5 percent plan on bringing some production back to the U.S.

Forty-six percent of respondents are looking to invest to support their top priorities in the next six months. Investing to increase sales topped the list of investment priorities at 53 percent, followed by 36 percent each for investing to develop new markets and increase productivity.

Trends that respondents foresee as possibly having the most negative impact on their businesses include:
• Domestic economic slowdown (53 percent).
• Additional environmental or financial regulations (35 percent).
• Global economic slowdown (29 percent).

“Compliance with evolving regulations and quality standards are a major challenge for midsized businesses,” said Langner. “In particular, in highly regulated industries such as food and beverage, pharmaceuticals or chemicals, manufacturers must keep track of all ingredients, allergens or hazardous substances that they process as part of a complex supply chain.

The Sage Manufacturing Survey focused primarily on small and midsized manufacturers and distributors in the U.S. (defined as smaller than 100 employees for the purposes of this survey). Over 90 percent of manufacturers in the United States are considered small businesses according to the SBA. About nine out of ten of the businesses responding have been in business longer than ten years.

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